The Presenter’s Guide to Porter’s Five Forces Analysis

Introduction

The Porter’s five forces analysis framework is one of the tools that is used for analyzing the competition within a business industry. It is a simple yet powerful tool that most businesses utilize in identifying their strategy’s potential profitability. One of the biggest threats to startups or established businesses is competition.

The five forces analysis framework model usually assumes that there are five forces that influence any chosen sector. These forces will end up prompting the firm to identify its competition and how the actions of the competition affect the firm and its future planning. When presenting a five forces analysis done with Porter’s five forces framework, a firm’s management ought to use a PowerPoint presentation which should be attractive and at the same time effective. Firms should also strive to conduct professional business presentations using pre-designed PowerPoint templates that help them achieve visual impact without the need of designs skills. An impactful presentation helps the audience to retain the importance concepts of the analysis.

What Should the Presentation Cover ?

In this posts, we will describe which items should be presented on each of the five forces, in order to emphasize the important topics of the analysis in your presentation, and make it effective. You can have carried out the most professional Five Forces Analysis, but if you are unable to transmit its Conclusions to an executive audience in an effective way , the results can be lost.

The Bargaining Power of Suppliers

This is the force responsible for analyzing how much power a business supplier has?. It also aims at determining how much control? they have, mainly, the potential to raise the prices which could lead to lower profitability by a firm. In presenting the analysis in your PowerPoint presentation, a business(through its management) should highlight the firm’s suppliers, by its name or by its product/ service. At this point, it would be prudent to note that the higher the number of the suppliers, the safer the business and the lower the number of the suppliers the more volatile the business is. Fewer suppliers will tend to have more power over the business and will tend to control the engagement. In your professional business presentations, one ought to present solutions depending on the conducted analysis of the business. For instance, if the current suppliers charge excessively high, a business may tend to consider the supplier switching costs relative to the firm’s switching costs, the strength of the distribution channel and the presence of the substitute inputs.

In this example, we present the analysis of Ryan Air Supplier Power (a popular case of the low cost Irish airline). In the PowerPoint Presentation the suppliers product is highlighted with uppercase and a bigger font. This allows the audience to fix those words in their mind, without the need of reading the explicative text. Also make sure that the conclusion of the Suppliers Power is identifiable. In the example, in the box title it shows how the supplier power is HIGH.

The Bargaining Power of the Consumers

According to the Porter’s 5 forces framework, this is the force that is responsible for determining the power of the Consumer to affect the price and the quality of the offered goods/services. The PowerPoint Design that presents the analysis should highlight the main consumers patterns that affect the business’ products or services. The presentation should then have the various measures that the firm could engage in to reduce the consumer’s power. The consumers’ power will be high if there are many alternatives. It will also be high if the consumers are able to switch from one product of a firm to another product/service of a rival firm. Depending on the analysis, various actions, such as implementing a loyalty program, could be put in place. This is if the consumer power is high. Other sound solutions would be generating differentiation of the firm’s products and services, this could help in reducing the consumers’ power. Some of the pointers that ought to be highlighted in the PowerPoint presentation are the buyer price sensitivity, the buyer information availability, the availability of existing substitutes, the buyer switching costs, the bargaining leverage and the degree of dependency on the existing channels of distribution.

As shown in the Disney example, the Consumer’s Power is considered WEAK, and the items that leverage this conclusion are BRAND, Unique consumer experience, and Customer Loyalty. The constant work over this items had led Disney to reduce the Consumer’s Power over time.

The Threat of New Entrants

In the professional business PowerPoint presentation, this should be another slide that aims at giving a better understanding of the analysis. This specific force will highlight how it is easy or difficult for competitors to join the marketplace? It would be prudent to include a tag that states that the easier it is for competitors to join the marketplace, the greater the risk of the firm’s market share getting depleted. This, in turn, will tend to make the profitability of the firm to decline. If the current firms do not make it difficult for others to join the marketplace, the profitability will tend to fall towards zero. This creates a perfect market in which each firm gets the least profit that is vital to keep the industry running. Some of the key items that the presentation should highlight after the analysis are:

the current government policies,

the product differentiation,

the customer loyalty to the business,

the current industry profitability,

the economies of scale

and the capital requirements.

These items will have an effect on how much of a threat new entrants to the marketplace may pose. They will then help the firm in coming up with a better strategy that will ensure that the marketplace is altered to the firm’s advantage.

For example, for the Tesla company Five Forces Analysis, the threat of new entrants is WEAK. The conclusion arrives for the following three mayor facts (highlighted in the slide)

High cost of brand develpment

High cost of doing business

High economies of scale.

Substitute Products and Services

This is the force that depicts how easy it is or how hard it is for a consumer to switch from a firm’s product or service to that of a competitor? In your PowerPoint presentation, it would be a good action to note down the competitors after conducting the 5 forces analysis. The presentation should have the competitors’ prices and the quality of their products/services in comparison to the firm in question. Among the facts that ought to be noted include the relative performance of a substitute, the perceived level of differentiation and the buyers’ switching costs.

In the example, the slide shows a lists of Apple Inc. products and highlights which are the main facts behind Apple’s control over the substitutes force. Even thought there is a High Availability of substitutes (concluding this fact might be assessed as moderate force) but the Low performance of those substitutes in comparison to Apple Products weights much more in the comparison, making the substitutes force tagged as WEAK.

Competitive Rivalry

This is the force that ends up determining how intense the competition is in the marketplace? This, in turn, is determined by the number of existing competitors in the marketplace and the impact of each. Competition rivalry will be high in cases where there are a few businesses that sell almost the same product, with a little bit of differentiation. In this scenario, the consumers can easily switch to a competitor’s product, of course, such actions driven by factors such as prices. In cases where the rivalry competition is high, advertising and price wars will ensue. These, if not handled carefully, may hurt a business. Some of the factors that will aid a firm in dealing with the competitive rivalry include:

the level of advertising expenses,

the competition in online and offline platforms,

the firm concentration ratio,

the degree of transparency

and the different strategies.

These factors will help a business strengthen their current strategies and in turn, increase their profitability.

If we take Nike Five Forces Analysis as an example, we are talking of a crowded industry (talking of sports clothing and accessories) so there is a STRONG force behind the competitive rivalry.

Conclusion

The analysis using the Porter’s five forces analysis should be a basis in which the firm finds and implements their strategy that should increase their competitive advantage. Such a professional PowerPoint business presentation will ensure that the firm is able to identify its weaknesses and strengths alike and forge forward positively.